TaxTMI 
TaxTMI 
2021 (10) TMI 1001
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....Grounds of appeal raised by the Revenue read as under: 1.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in directing to delete the addition of Rs. 2,42,25,698/- made u/s 68 of the Act without appreciating facts of the case in totality. 2.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in directing to delete the addition made u/s 68 of the Act by shifting the onus on the AO instead of the assessee whereas its settled law in view of the provisions laid down vi] s 68 of the IT Act that the assessee is supposed to furnish entire details in support of claim made by him in its books of accounts and particularly with respect to the credit entries in its books of accounts for alleged loans. 3.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in directing to delete the addition made u/s 68 of the Act, even when the assessee has utterly failed in establishing identity, creditworthiness of alleged lenders and genuineness of the loan transactions. 3.1 Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in considering the addi....
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....through the assessment order and the submissions made by the appellant in this regard. 3.1 In the year under consdieration the assessing officer has added the loan as taken by the appellant from the following directors:- S.No Name of the loan creditors PA No Amount [in Rs] 1 Pramod Khandelwal ADUPK6514C 74,50,000 2 Satyendra Bhawasar ACIPB0657L 89,20,000 Total 1,63,70,000 3.2 The appellant had taken loan from its directors. The appellant has submitted that the identity of the directors of the company was beyond doubt. The appellant was asked to justify the identity, creditworthiness and genuineness of the loan and it filed the following details and documents:- "[i] the assesee has received entire amount of loan through an account payee cheques. [ii] PA No of the loan creditors have also been provided [iii] Confirmation of loan creditors have also been filed [iv] income tax return along with acknowledgement" 3.3 Thus, it appears that the appellant had filed sufficient documents to justify the identity, genuineness and creditworthiness of the loan creditors. Th....
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....with the version as recorded in Para [vi] on Page No 9 and as the law stands today, the said version is also not the correct version. Thus, the appellant argued that if the assessing officer was not satisfied with the source of source, in that case he had the right to trasnfer the said information to the assessing officer of the unsecured loan creditors but no negative inference could be drawn in the case of the appellant. I find merit in the submissions of the appellant. The AO can always call for the bank accounts of the creditors directly from the bank, if he feels that there is some ambiquity regarding the same. The AO has vast power in this regard both under section 133(6) and 131(1) which the AO has not choosen to do in the instant case. 3.8 The appellant had during the course of assessment proceeding filed copy of confirmation letter duly signed by the loan creditors and also copy of Acknowledgement and computation of income of the loan creditors and therefore, apparently, the appellant had properly discharged onus lying on it. 3.9 On receipt of income tax assessment detail, the assessing officer could found at the address given, it would not give the Reven....
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....f the directors of the assessee was proved beyond any doubt. It is evident from the above that the assessee had filed sufficient documents so as to justify the identity, genuineness and creditworthiness of the loan creditors. The Assessing Officer did not make any inquiry from the Assessing Officer where the loan creditors are regulalry assessed to tax and simply added the entire amount of loan to the total income of the asssessee merely for the reason that bank statement of the directors were not been filed by the assessee during the course of assessment proceedings. We find that during the course of assessment proceedings, the assessee discharged the primary onus as cast upon it under section 68 of the I.T. Act becuase the amount of loan was received from the directors of the assessee. The Assessing Officer failed to call the bank statements from the loan creditors and merely added the amount of loan to the total income of the assessee. We find taht the Assessing Officer himself noted that in case of loan from outside parties, the assessee need to file copy of confirmation only and in last line of page 9 of the assesment order, the Assessing Officer noted that the Assessing Offic....
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....eported in 245 ITR 160 has held as under: "3. We have heard learned counsel for the parties. Sec.68 of the Act of 1961 says that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source, thereof or the explanation offered by him is not, in the opinion of the ITO, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. Therefore, according to s. 68, the first burden is on the assessee to satisfactorily explain the credit entry in the books of account of the previous year. If the explanation given by the assessee is satisfactory, then that entry will not be charged with the income of the previous year of the assessee. In case the explanation offered by the assessee is not satisfactory or the source offered by the assessee-firm is not satisfactory, then in that case, the amount should be taken to be the income of the assessee. In the present case, the AO did not feel satisfied with the explanation given by the assessee and accordingly assessed all the three credit entries to the account of the assessee as the incom....
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....sfied that the aforesaid two questions are questions of law arising out of the order and are required to be referred for our opinion. " 10. Hon'ble Jurisdictional High Court in the case of CIT Vs Barjatiya Children Trust as reported in 225 ITR 640 held as under: "3. We find that the Tribunal dismissed the appeal of the Department and held as under: "He found that in the balance-sheet the loan of Rs. 20,000 given to the assessee-trust was mentioned. Under these circumstances, the Department should not have any grievance as to violation of r. 46A. The ITO could have taken pains to examine the income-tax file of Smt. Urmila Agrawal but instead he chose the easier course of ordering production of the creditor which cannot be appreciated. The Assessing Officer should realise the inconveniences which an assessee faces in producing the cash creditor before him. The production of the cash creditor in person should be insisted upon only when the genuineness of the transactions cannot be established with the help of documents and the record of the IT Department itself. I find no infirmity in the order of the Deputy CIT (A.). It is sustained." 4. On applicati....
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....see to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limine with no order as to cost." 13. Hon'ble Jurisdictional High Court in the case of Sumer Chand Jain Vs CIT as reported in 292 ITR 241 has discussed the said case and held as under: "12. In the case of CIT vs. Mehrotra Brothers (2004) 270 ITR 157 (MP) a Division Bench of this Court placing reliance on the decisions rendered in the cases of Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal), Gee Vee Enterprises vs. Addl. CIT 1975 CTR (Del) 61 : (1975) 99 ITR 375 (Del), CIT vs. Kohinoor Tobacco Products (P) Ltd. (1998) 148 CTR (MP) 536 : (1998) 234 ITR 557 (MP), Nanak Chandra Laxman Das vs. CIT (1982) 28 CTR (All) 280 : (1983) 140 ITR 151 (All) and Malabar Industrial Co, Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC), expressed the view that when the identity of the parties is given the genuineness or the capacity of the lenders and transaction are not to be discarded on the ground that the assessee had not explained satisfactorily the cash credit in ....
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....e course of assessment proceeding. The appellant further submitted as below:- "The assessing officer for want of PA No and ITR of the Society added the amount to the income of the appellant. That directors and their family members are not in the board of the society as on the date of taking the loan similar to the cash credit/ mortgage loan of the bank. Hence, as per S.No Reason for addition 1 Directors their family members and friends of the present company is the office bearers/ promotors of the society 2 Confirmation , ITR, Bank statement and PA No of the loan creditors was not provided. (1)para [vi] on Page No 9 of the assessment order, mere filing of the confirmation suffice the entire purpose and the assessing officer need not asked to prove the appellant other details. That whether the said soceity is filing its income tax return or not is not the business of the appellant. The appellant during the course of assessment proceeding file copy of confirmation of amount as received by the appellant from that society. Thus, there was no justification for making addition to the income of the appellant." 4.2 Copy of Income Tax return as f....
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....on of the appellant and also the fact that the account balance of the loan account was duly confirmed and submitted during the course of the assessment proceedings. It is clear that the onus required to be discharged with respect to identity, genuineness and creditworthiness have been duly discharged by the appellant and more so the transaction is part of the regular overdraft account maintained by the appellant company with the cooperative society. Thus, the addition so made is hereby deleted and this ground of appeal is allowed." 17. Being aggrieved, the Revenue is in appeal before this Tribunal. Ld. Departmental Representative(DR) vehemently argued supporting the order of the Assessing Officer. 18. Per contra Ld. counsel for the assessee heavily relied on the finding of ld. CIT(A) and reiterated the submissions made before the Revenue Authorities. Reference was also made to the paper book and written submission/judicial pronouncements contending that ld. CIT(A) having appreciated the facts and material on record in the light of the relevant judicial pronouncements rightly deleted the addition. Learned Counsel for the assessee relied upon the judicial pronouncements (supra)....
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.... account of the society in the books of accounts of the assessee for the year under consideration and vice-versa and also for the subsequent year filed by the assessee at page no. 122 to 125 reveals that the assessee had repaid entire amount of loan as taken from the society in the subsequent year. We find that the assessee had duly filed its copy of account in the books of the society which was also tallied with the copy of account of the society in the books of accounts of the assessee, therefore, the copy of account of the assessee in the books of the society is the confirmation itself which was filed by the assessee during the course of assessment proceedings. Thus, the Assessing Officer was not justified in observing that confirmation was not filed by the assessee during the course of assessment proceedings. In view of these facts, the ld. CIT(A) rightly noted that the addition on account of overdraft loan as taken by the assessee made by the assessing officer was neither correct nor proper as the account balance of the loan account was duly confirmed and filed during the course of the assessment proceedings. Thus, it is clear that the onus required to be discharged with respe....
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....y, the assessee submitted that the assessee in the year under consideration had purhcased land for Rs. 3,74,67,770/- and incurred development of land expenses of Rs. 22,94,996/- and entry tax of Rs. 80,828/- but no construction work was undertaken by the assessee in the present year. The detail of development expenses as incurred by the assessee for its own project was also been provided to the Assessing Officer during the course of assessment proceeding. The Assessing Officer also observed that since the assessee has not maintained project wise seperate set of books of account, books result as declared by the assessee was liable to be rejected u/s 145 of the Act. In reply, the assessee submitted that in the year under consdieration, the assessee had incurred major expenses for the work contract undertaken by it only. The assessee had purhcased land for its own project and also incurred small amount of development expenses. Detail of the same had also been provided by the assessee. Thus, the assessee explained that since the own project was not started in the year under consideration, the entire profit as declared by the assessee relates to its work contract only. It was also obser....
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....mitted that developmenet expesnes of Rs. 7,73,04,298/- includes cost of land as purhcased by the assessee for its own project of Rs. 3,74,67,770/- and, therefore, effective development expenses as incurred by the assessee was of Rs. 3,98,36,528/-. The said amount includes an amount of Rs. 23,75,824/- as incurred by the assessee for its own project and, therefore, an amount of Rs. 3,74,60,704/- was incurred by the assessee for the work contract and for work of Rs. 3,74,60,704/-, the assessee had raised bill of Rs. 1,05,89,210/- and balancce amount of Rs. 2,82,13,368/- was capitalised and shown as closing WIP. Thus, the Assessing Officer was not justified in considering that the assessee has claimed entire expenses as incurred for the project as revenue more so when from the face of the audited account, it was clear that deduction was claimed only in respect of those expenses for which bill was raised and balance amount shown as closing WIP. Ultimately, the Assessing Officer calculated the income at 8% on the amount of development expenses of Rs. 7,73,04,298/- as incurred by the assessee in this year for which the assessee explained that the total cost of Rs. 7,73,04,298/- also incld....
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....incurred 3,98,43,594 3,74,60,704 7,73,04,298 3 Total cost including opening WIP 3,98,43,594 3,75,41,404 7,73,84,998 4 Cost of closing Work in Progress 3,98,43,594 2,82,94,068 6,81,37,662 5 Cost of Material & Labour related to which bill raised[2-3] NIL 92,47,336 92,47,336 6 Bill raised during the year under appeal 1,05,89,210 1,05,89,210 Gross Profit on Construction work 17,41,874 17,41,874 From the perusal of the above details in the light of the above detailed discussion of facts and submissions thereof, we find that the assessee had raised bills to the land owners from time to time on the basis of terms of its agreement and on the basis of stage of completion as agreed upon by the assessee with the land owners. Further, we are of the view that there was no law for maintianing project wise seperate sets of books of account but what is necessary is to calculate seperate project-wise profit and the assessee had properly maintained details of expenses as incurred for particular project and the same was controlled through cost centre. Thus, the books of account as rejected by t....